What has been happening lately is that scam contractors present
credentials (license numbers, business cards, etc.) of legitimate
licensed contractors, even though they are not affiliated with these
businesses. When a homeowner checks on the legitimacy of the
business with the BBB, they check out ok, and the scammer has been
able to pull off the first part of the con. The homeowner now feels
comfortable working with a "legitimate" contractor.
From there, the scam contractor will try to get money up-front
for work to be done. There will be excuses such as needing
materials, supplies and such. There may be promises of getting at
the top of the list, or discounts because their equipment is already
in the area if you act immediately, and of course hand over money.
Remember, once the money is in their hands, you have lost.
MAKE THE FOLLOWING DEMANDS.
To protect yourself, you as a homeowner MUST DEMAND that the
contractor prove to you:
A. Bona Fide Employee or Owner. That the person you are dealing
with is truly an employee or owner or authorized agent of the
contractor.
B. Documentation. Be sure that the contractor has all the
proper insurance and bonding documents.
**Keep in mind that any legitimate contractor will NOT be
offended if you demand (politely of course) that they provide proof
of license, bonding, insurance and references before you enter into
any type of agreement. They expect this, and it is these
requirements that keep unlicensed contractors from taking advantage
of the unsuspecting homeowners.**
Now that you have taken the time to confirm that the contractor
that you are dealing with is legitimate and passes the above listed
requirements, you can move on to the next phase.
GET IT IN WRITING. Obtain a firm WRITTEN quote from the
contractor detailing the exact work to be performed, the exact cost
for the work, the date the work will begin, and the time it will
take to complete the work.
GET AN EXACT PRICE QUOTATION. DO NOT sign any contracts or agree
to pay a contractor based on "open time and materials" needed to
perform the work. GET AN EXACT PRICE. Time and materials is vague
and unclear as to how much it will cost, and the contractor has no
incentive to finish quickly or efficiently.
GET ALL CHANGES IN WRITING. Just as with the original contract,
DO NOT approve changes in the price or scope of work verbally.
Insist that all changes in price or scope of work be in writing
signed by both the contractor and the homeowner.
YOUR RIGHT TO RESCIND. DO NOT waive (give up) you 3 day right to
rescind the contract unless the work you need done is truly an
emergency that cannot wait to be started for 3 days. DO NOT fall for
"getting the work done at a discount because the contractor just
happens to be in the area". This is an old trick that the homeowner
falls for thinking he will be getting a price break.
DOWN PAYMENT. Generally a deposit for work is 10% of the entire
contract price or $1000.00 (which ever is less) for a down payment
before any work is done. Deviating from this will only put yourself
at greater risk for fraud.
ADVANCE PAYMENTS. By law, the contractor cannot ask for payments
for any work that has NOT YET BEEN DONE. DO NOT prepay for materials
not yet delivered either.
WAIVERS AND RELEASES. DEMAND that your contractor provide an
"Unconditional waiver and release" from all their material suppliers
and subcontractors used by the contractor for the work you have
already paid for BEFORE you pay for any more work. Even if your
contractor gives their own written guarantee that its suppliers and
subcontractors have been paid, those suppliers and subcontractors
may still record a "Mechanics Lien " against your property if your
contractor fails to pay them. This is very important, DO NOT let the
contractor talk you out of these. It is for your protection.
PAYMENT and PERFORMANCE BONDS. If the work to be done is
significant, the homeowner should consider requiring the contractor
to obtain a payment and performance bond. The principal cost of the
bonds may have to be paid by the homeowner (which is a percentage of
the value of the work to be performed taking into consideration
specific factors relating to the contractor). However, it is a red
warning flag if the contractor has trouble qualifying for the
payment and performance bonds, or if the premium required is higher
than the average premium.
